[Desk Column] Cool Governance

Kyung-ho Lee, Head of Editorial Planning Team

[Asia Economy, Kyungho Lee, Head of Editorial Planning Team] "What do I want from the government and the National Assembly? Nothing. I just hope they don't interfere."

Before the emergence of the novel coronavirus infection (COVID-19), the consistent wish of the business community was 'freedom' from the legislative and executive branches. With abundant human resources, solid organizations, and ample cash liquidity, government support was not particularly welcome, and the National Assembly, which seemed only to create regulatory legislation, was not well regarded. What they wanted was simply for companies to be free to manage their businesses without interference.

However, COVID-19 changed the situation. The crisis caused by COVID-19 shook the foundation of corporate management beyond consumption stagnation and sluggish domestic and export markets. Even companies that thought they had built a business structure strong against crises had no choice but to enter emergency management measures such as salary cuts, unpaid leave, and suspension of operations. The crisis that began roughly in January and February seemed to have peaked in March and April, but the general consensus is that the real crisis started in May.

Not only small and medium-sized enterprises, small business owners, and self-employed individuals but also large corporations leading key industries found themselves reaching out to the government for help. The government also shifted from its initial stance of "it is difficult to support large corporations" or "considering support only after self-help measures" to deciding to support key core industries on the premise of employment stability. This includes tax reductions, tax and financial support, and direct or indirect funding from policy financial institutions such as the Korea Development Bank and the Export-Import Bank of Korea. What is clear here is that companies experiencing liquidity crises that receive public funds inevitably come under the government's 'influence' in some form.

There is a saying, "Where there is income, there is tax," but going further, "Where there is tax, there is government." If even one won of tax money is involved, the government has room to intervene. This is the so-called necessary condition for government control (gwanchi). Government control is an attractive tool for administrations. Since tax or policy funds are invested in certain places (institutions or companies), there is inevitably a justification for management, supervision, and monitoring. Whether the target is an institution head, auditor, or board of directors, whether private or public institutions, the government can send people who understand or are thought to understand the administration and government policies (parachute appointments) and intervene in decision-making through various channels. The business community has long argued "support but do not interfere." Unfortunately, this time looks different. Because the government has supported large corporations by borrowing money due to COVID-19. With tens of trillions of won of taxpayers' money invested, the government must check whether the funds are properly used and effective. It is not "support and end" but "support is a new beginning."

At this point, I want to make a request to both the government and companies. To the government: "Support, but (not to say no interference) minimize interference." A typical form of interference is parachute appointments of regime people. If someone without experience, insight, or vision in the relevant field is parachuted in, they may serve as an umbrella (a shield for the regime) but will not be able to block the wind (crisis). The case of Daewoo Shipbuilding & Marine Engineering, which failed due to parachute appointments, should serve as a cautionary example. Support should end with helping companies, not with trying to lead them. If large corporations are to be supported, support should also be extended to representative core industries and export sectors such as refining and petrochemicals, which are suffering from low oil prices.

Companies are required to bear heavier responsibilities than ever. The government set preconditions such as employment stability, prevention of moral hazard, and sharing of normalization benefits to avoid controversy over preferential treatment of large corporations. Since its inception, the Moon Jae-in administration has walked an unprecedented path and must continue to do so. Because there is no precedent, it must seek solutions rather than correct answers. If government control is to be exercised, I hope a cool government control model that saves the economy and companies, supports but minimizes interference, will be created.

This content was produced with the assistance of AI translation services.